Captive Insurance

Definition

A captive insurance arrangement, in the context of employer health benefits, is typically a group captive — a structure in which multiple employers pool their self-funded health plan risk into a shared entity. The captive collectively purchases stop-loss coverage with better terms and lower costs than individual employers could negotiate alone, and members share in underwriting gains when the pool performs well. Each employer retains its own claims layer below the specific deductible but benefits from the collective purchasing power of the group for catastrophic coverage.

What This Means for Employers

Group captives can be an excellent middle ground for employers who want the cost advantages and data visibility of self-funding but are not large enough to be comfortable going fully self-funded independently. Membership in a well-managed captive also provides access to a community of similarly situated employers, shared vendor relationships, and often superior stop-loss pricing. The due diligence process matters significantly — not all captives are equally well managed, and the financial stability and governance of the captive should be evaluated carefully before joining.

Related Terms

• Self-Funded Health Plan
• Stop-Loss Insurance
• Level-Funded Health Plan
• Claims Audit